10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38130

 

Aileron Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

13-4196017

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

285 Summer Street, Suite 101

Boston, MA

 

02210

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 995-0900

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

ALRN

The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of May 2, 2022, the registrant had 90,823,597 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

3

Item 1.

 

Financial Statements (Unaudited)

 

3

 

 

Condensed Balance Sheets

 

3

 

 

Condensed Statements of Operations and Comprehensive Loss

 

4

 

 

Condensed Statement of Stockholders’ Equity

 

5

 

 

Condensed Statements of Cash Flows

 

6

 

 

Notes to Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

27

Item 4.

 

Controls and Procedures

 

27

PART II.

 

OTHER INFORMATION

 

28

Item 1.

 

Legal Proceedings

 

28

Item 1A.

 

Risk Factors

 

28

Item 6.

 

Exhibits

 

28

 

 

Signatures

 

29

 

1


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

our plans to develop and commercialize ALRN-6924, including the potential benefits thereof;
our ongoing and future clinical trials for ALRN-6924, whether conducted by us or by any future collaborators, including the timing of initiation of these trials and of the anticipated results;
our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and investments;
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
the timing of and our ability to obtain and maintain marketing approvals for ALRN-6924;
the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position and strategy;
our ability to identify additional product candidates with significant commercial potential;
our plans to enter into collaborations for the development and commercialization of ALRN-6924 and any additional product candidates;
potential benefits of any future collaboration;
developments relating to our competitors and our industry;
the impact of government laws and regulations;
the impact the coronavirus pandemic may have on the timing of our clinical development and on our operations; and
our ability to maintain our listing on the Nasdaq Capital Market.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.

2


 


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AILERON THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,449

 

 

$

3,600

 

Investments

 

 

30,626

 

 

 

42,333

 

Prepaid expenses and other current assets

 

 

1,893

 

 

 

2,219

 

Restricted cash

 

 

25

 

 

 

25

 

Total current assets

 

 

39,993

 

 

 

48,177

 

Operating lease, right-of-use asset

 

 

125

 

 

 

152

 

Other non-current assets

 

 

24

 

 

 

24

 

Property and equipment, net

 

 

113

 

 

 

128

 

Total assets

 

$

40,255

 

 

$

48,481

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,023

 

 

$

1,210

 

Accrued expenses and other current liabilities

 

 

2,992

 

 

 

3,205

 

Operating lease liability, current portion

 

 

131

 

 

 

93

 

Total current liabilities

 

 

4,146

 

 

 

4,508

 

Operating lease liability, net of current portion

 

 

 

 

 

69

 

Total liabilities

 

 

4,146

 

 

 

4,577

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized and no shares
   issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

 

 

 

 

Common stock, $0.001 par value; 300,000,000 shares authorized at
   March 31, 2022 and December 31, 2021;
90,823,597 and 90,573,597 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

91

 

 

 

91

 

Additional paid-in capital

 

 

289,971

 

 

 

289,282

 

Accumulated other comprehensive loss

 

 

(75

)

 

 

(13

)

Accumulated deficit

 

 

(253,878

)

 

 

(245,456

)

Total stockholders’ equity

 

 

36,109

 

 

 

43,904

 

Total liabilities and stockholders’ equity

 

$

40,255

 

 

$

48,481

 

 

The accompanying notes are an integral part of these condensed financial statements.

3


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

5,893

 

 

 

4,316

 

General and administrative

 

 

2,528

 

 

 

2,673

 

Total operating expenses

 

 

8,421

 

 

 

6,989

 

Loss from operations

 

 

(8,421

)

 

 

(6,989

)

Interest income

 

 

21

 

 

 

14

 

Other income, net

 

 

(22

)

 

 

 

Net loss

 

 

(8,422

)

 

 

(6,975

)

Net loss per share — basic and diluted

 

$

(0.09

)

 

$

(0.08

)

Weighted average common shares outstanding—basic and diluted

 

 

90,673,597

 

 

 

83,384,371

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(8,422

)

 

$

(6,975

)

Other comprehensive loss:

 

 

 

 

 

 

Unrealized loss on investments, net of tax of $0

 

 

(62

)

 

 

(5

)

Total other comprehensive loss

 

 

(62

)

 

 

(5

)

Total comprehensive loss

 

$

(8,484

)

 

$

(6,980

)

 

The accompanying notes are an integral part of these condensed financial statements.

4


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated
Other

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par
Value

 

 

Paid-in
Capital

 

 

Comprehensive
Loss

 

 

Accumulated
Deficit

 

 

Stockholders'
Equity

 

Balances at December 31, 2021

 

 

90,573,597

 

 

$

91

 

 

$

289,282

 

 

$

(13

)

 

$

(245,456

)

 

$

43,904

 

RSUs vested, net of shares repurchased for tax

 

 

250,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

0

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

689

 

 

 

 

 

 

 

 

 

689

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(62

)

 

 

 

 

 

(62

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,422

)

 

 

(8,422

)

Balances at March 31, 2022

 

 

90,823,597

 

 

$

91

 

 

$

289,971

 

 

$

(75

)

 

$

(253,878

)

 

$

36,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

43,804,175

 

 

$

44

 

 

$

231,412

 

 

$

(2

)

 

$

(219,292

)

 

$

12,162

 

Issuance of common stock

 

 

46,406,382

 

 

 

46

 

 

 

59,042

 

 

 

 

 

 

 

 

 

59,088

 

Issuance costs

 

 

 

 

 

 

 

 

(3,482

)

 

 

 

 

 

 

 

 

(3,482

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

631

 

 

 

 

 

 

 

 

 

631

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,975

)

 

 

(6,975

)

Balances at March 31, 2021

 

 

90,210,557

 

 

$

90

 

 

$

287,603

 

 

$

(7

)

 

$

(226,267

)

 

$

61,419

 

 

The accompanying notes are an integral part of these condensed financial statements.

5


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(8,422

)

 

$

(6,975

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

41

 

 

 

2

 

Net amortization of premiums and discounts on investments

 

 

(3

)

 

 

62

 

Stock-based compensation expense

 

 

689

 

 

 

631

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

326

 

 

 

981

 

Other assets

 

 

 

 

 

(22

)

Accounts payable

 

 

(187

)

 

 

(1,038

)

Operating lease liabilities

 

 

(31

)

 

 

(12

)

Accrued expenses and other current liabilities

 

 

(213

)

 

 

(105

)

Net cash used in operating activities

 

 

(7,800

)

 

 

(6,476

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(85

)

Purchases of investments

 

 

(4,712

)

 

 

(41,124

)

Proceeds from sales or maturities of investments

 

 

16,361

 

 

 

3,750

 

Net cash provided by (used in) investing activities

 

 

11,649

 

 

 

(37,459

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

 

 

 

55,604

 

Net cash provided by financing activities

 

 

 

 

 

55,604

 

Net increase/(decrease) in cash, cash equivalents and restricted cash

 

 

3,849

 

 

 

11,669

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

3,625

 

 

 

7,639

 

Cash, cash equivalents and restricted cash at end of period

 

$

7,474

 

 

$

19,308

 

 

The accompanying notes are an integral part of these condensed financial statements.

6


 

AILERON THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation

Aileron Therapeutics, Inc. (“Aileron” or the “Company”) is a clinical stage chemoprotection oncology company focused on developing medicines to make chemotherapy safer and thereby more effective to save more patients’ lives. ALRN-6924, the Company’s first-in-class MDM2/MDMX dual inhibitor, is designed to activate p53, which in turn upregulates p21, a known inhibitor of the cell replication cycle. ALRN-6924 is the only reported chemoprotective agent in clinical development to employ a biomarker strategy, in which the Company exclusively focuses on treating patients with p53-mutated cancers. The Company’s targeted strategy is designed to selectively protect multiple healthy cell types throughout the body from chemotherapy without protecting cancer cells.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, uncertainties in the clinical development of product candidates and in the ability to obtain needed additional financing. ALRN-6924 will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of ALRN-6924 will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that ALRN-6924 will obtain necessary governmental regulatory approval or that if approved, will be commercially viable. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its key employees and consultants.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s interim financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through March 31, 2022, the Company has financed operations primarily through $145,467 in net proceeds from sales of common stock, $131,211 from sales of preferred stock prior to its IPO, and $34,910 from a collaboration agreement in 2010.

As of March 31, 2022, the Company had cash, cash equivalents and investments of $38,075. The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $253,878 as of March 31, 2022. The Company expects to continue to generate losses for the foreseeable future.

The Company believes that, based on its current operating plan, its cash, cash equivalents and investments of $38,075 as of March 31, 2022 will enable the Company to fund its operating expenses for greater than twelve months from the date of issuance of these financial statements.

7


 

To execute its business plans beyond the next twelve months, the Company will need substantial funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through the sale of common stock in public offering and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain financing when needed, on acceptable terms or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its clinical programs, product portfolio expansion plans or commercialization efforts, which could adversely affect its business prospects. The interim financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of common stock and stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Unaudited Interim Financial Information

The accompanying unaudited condensed financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 that was filed with the SEC on March 28, 2022.

 

The unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022, the results of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are unaudited. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. The accompanying balance sheet as of December 31, 2021 has been derived from the Company’s audited financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 28, 2022.

 

Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. Cash equivalents, which consist of money market accounts, corporate notes and commercial paper, are stated at fair value.

Restricted Cash

As of March 31, 2022 and December 31, 2021, restricted cash consisted of $25 deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards.

Investments

The Company classifies its available-for-sale debt security investments as current assets on the balance sheet if they mature within one year from the balance sheet date.

8


 

The Company’s investments are measured and reported at fair value using quoted prices in active markets for similar securities or using other inputs that are observable or can be corroborated by observable market data. Unrealized gains and losses on available-for-sale securities are reported as accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity (deficit). The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense) within the statements of operations and comprehensive loss.

The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general, among other factors. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statements of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company has maintained all of its cash, cash equivalents and investment balances at three accredited financial institutions, in amounts that exceed federally insured limits. The Company generally invests its excess cash in money market funds, commercial paper and corporate notes that are subject to minimal credit and market risks. Management has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. The investment portfolio is maintained in accordance with the Company’s investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable.

 

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities.

Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss is computed by adjusting basic loss per share to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share is computed by dividing the diluted net loss by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding options, restricted stock units and warrants to purchase common stock are considered potential dilutive common shares. In periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

9


 

Risks and Uncertainties

The ongoing COVID-19 pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce. The future progression of the pandemic and its effects on our business and operations are uncertain.

Potential impacts to the Company’s business include disruptions in supply of the Company’s product candidate and/or procurement of items that are essential for the Company’s research and development activities, including, for example, raw materials used in the manufacturing of ALRN-6924, medical and laboratory supplies used in the Company’s clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic. While the Company believes that it currently has sufficient supply of its product candidate to continue the Company’s ongoing and planned clinical trials, its product candidate, or materials contained therein, come from facilities located in areas impacted by the COVID-19 pandemic.

Additionally, the Company has enrolled, and is seeking to enroll, cancer patients in the Company’s clinical trials at sites located both in the United States and Europe, which are areas that continue to be impacted by the COVID-19 pandemic. Enrollment at clinical trial sites has been and may continue to be disrupted as the effects of the COVID-19 pandemic persist. In the event that clinical trial sites close to enrollment in the Company’s trials or shift resources to address COVID-19, this could have a material adverse impact on the Company’s clinical trial plans and timelines. The Company may face difficulties recruiting or retaining patients in its ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to the Company’s clinical trial sites because of the COVID-19 pandemic.

 

Any negative impact that the COVID-19 outbreak has on the ability of the Company’s suppliers to provide materials necessary for the Company’s product candidate or on recruiting or retaining patients in the Company’s clinical trials could cause costly delays to clinical trial activities, which could adversely affect the Company’s ability to obtain regulatory approval for and to commercialize the Company’s product candidate, increase the Company’s operating expenses, affect the Company’s ability to raise additional capital, and impact the Company’s operating and financial results. The capital markets have also experienced significant volatility as a result of the pandemic. Future disruptions in the capital markets could negatively impact the Company’s ability to raise capital in the future.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (ASU 2016-13 or Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. The ASU will be effective for the Company's fiscal year beginning January 1, 2023. The Company is currently evaluating the impact of the adoption of ASU 2016-13 and does not expect adoption to have a material effect on the Company’s consolidated financial statements or disclosures.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s financial statements upon adoption.

3. Fair Value of Financial Assets

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

 

Fair Value Measurements as of
March 31, 2022 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

5,257

 

 

$

 

 

$

 

 

$

5,257

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

24,638

 

 

 

 

 

 

24,638

 

Corporate notes

 

 

 

 

 

1,256

 

 

 

 

 

 

1,256

 

Treasury bills

 

 

 

 

 

4,732

 

 

 

 

 

 

4,732

 

 

 

$

5,257

 

 

$

30,626

 

 

$

 

 

$

35,883

 

 

10


 

 

 

 

Fair Value Measurements as of
December 31, 2021 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

2,438

 

 

$

 

 

$

 

 

$

2,438

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

33,969

 

 

 

 

 

 

33,969

 

Corporate notes

 

 

 

 

 

6,366

 

 

 

 

 

 

6,366

 

Treasury Bills

 

 

 

 

 

1,998

 

 

 

 

 

 

1,998

 

 

 

$

2,438

 

 

$

42,333

 

 

$

 

 

$

44,771

 

 

As of March 31, 2022 and December 31, 2021, the Company’s cash equivalents and investments were valued based on Level 1 and Level 2 inputs. In determining the fair value of its corporate notes and commercial paper at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data. The Company’s cash equivalents have original maturities of less than 90 days from the date of purchase. All available-for-sale investments have contractual maturities of less than one year. During the three months ended March 31, 2022 and the year ended December 31, 2021, there were no transfers in or out of Level 3.

4. Investments

As of March 31, 2022 and December 31, 2021, the fair value of available-for-sale investments by type of security was as follows:

 

 

 

March 31, 2022

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gain

 

 

Gross
Unrealized
Loss

 

 

Fair
Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

24,689

 

 

$

 

 

$

(51

)

 

$

24,638

 

Corporate notes

 

 

1,261

 

 

 

 

 

 

(5

)

 

 

1,256

 

Treasury Bills

 

 

4,751

 

 

 

 

 

 

(19

)

 

 

4,732

 

 

 

$

30,701

 

 

$

 

 

$

(75

)

 

$

30,626

 

 

 

 

December 31, 2021

 

 

 

Amortized
Cost

 

 

Gross
Unrealized
Gain

 

 

Gross
Unrealized
Loss

 

 

Fair
Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

33,976

 

 

$

 

 

$

(7

)

 

$

33,969

 

Corporate notes

 

 

6,368

 

 

 

 

 

 

(2

)

 

 

6,366

 

Treasury bills

 

 

2,002

 

 

 

 

 

 

(4

)

 

 

1,998

 

 

 

$

42,346

 

 

$

 

 

$

(13

)

 

$

42,333

 

 

5. Property and Equipment, Net

Property and equipment, net consisted of the following:

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Computer equipment and software

 

$

340

 

 

$

340

 

Less: Accumulated depreciation and amortization

 

 

(227

)

 

 

(212

)

 

 

$

113

 

 

$

128

 

 

11


 

 

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $15 and $2 respectively. During the year ended December 31, 2021, the Company received payment for disposed, fully depreciated assets, resulting in a gain on sale of $66.

 

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

 

 

March 31,
2022

 

 

December 31,
2021

 

External research and development services

 

$

1,927

 

 

$

1,575

 

Payroll and payroll-related costs

 

 

535

 

 

 

1,182

 

Professional fees

 

 

503

 

 

 

388

 

Other

 

 

27

 

 

 

60

 

 

 

$

2,992

 

 

$

3,205

 

 

7. Paycheck Protection Loan

On April 30, 2020, the Company received loan proceeds in the amount of approximately $384 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP.

The Company determined to account for the PPP loan as debt under Accounting Standards Update (“ASC 470”), “Debt”, and allocated and recorded the loan proceeds between current and non-current liabilities.

On May 20, 2021 the Small Business Administration notified the Company that the PPP loan had been forgiven in full. During the year ended December 31, 2021 the Company recognized income for debt extinguishment pursuant to ASC 470-50-15-4 as other income.

8. Lease

On March 26, 2021, the Company entered into a sublease agreement (the “Sublease”) by and among the Company, Vittoria Industries North America, Inc. (the “Sublessor”) and Waterfront Equity Partners, LLC (the “Lessor”), under which the Company is leasing approximately 3,365 square feet of office space located at 285 Summer Street, Unit 101, Boston, Massachusetts (the “Premises”). The Sublease is subject and subordinate to a lease agreement, dated as of July 13, 2012, by and between the Sublessor and Lessor (the “Prime Lease”), pursuant to which the Sublessor is leasing the Premises from the Lessor.

The term of the Sublease (the “Term”) commenced on April 1, 2021 and terminates upon the earliest to occur of (i) March 31, 2023, (ii) early termination of the Prime Lease or (iii) termination of the Sublease pursuant to the terms thereof. The Company is obligated to pay monthly base rent under the Sublease to the Sublessor in an approximate amount of $12 per month during the Term. The Company recorded a right of use asset of $228 and operating lease liabilities of $217 upon the inception of the Sublease.

9. Common Stock

On June 16, 2021, the Company filed a certificate of amendment to its restated certificate of incorporation which increased the authorized number of shares of common stock from 150,000,000 shares of $0.001 par value common stock to 300,000,000 shares of common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s board of directors, if any, subject to the preferential dividend rights of the preferred stock. As of March 31, 2022 and December 31, 2021, no dividends had been declared.

12


 

On January 6, 2021, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company issued and sold, in a registered direct offering (the “Offering”), an aggregate of 32,630,983 shares of common stock, $0.001 par value per share, at a purchase price per share of $1.10 (the “Shares”). The aggregate gross proceeds of the Offering were $35,894, before deducting $2,887 of fees payable to the placement agent and other offering expenses payable by the Company. The Offering closed on January 8, 2021.

Between January 1, 2021 and January 28, 2021, the Company issued and sold an aggregate 7,174,993 shares of its common stock pursuant to its sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”), resulting in gross proceeds of $9,658, before deducting expenses of $290. The Company terminated its sales agreement with Jones Trading in January 2021.

On January 29, 2021, the Company entered into a Capital on Demand™ Sales Agreement (the “ATM Sales Agreement”) with JonesTrading and William Blair & Company, L.L.C. (“William Blair” and, collectively with JonesTrading, the “Agents”), pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $30,000 from time to time through or to the Agents (the “ATM Offering”). During the year ended December 31, 2021, the Company issued and sold an aggregate of 5,225,406 shares of its common stock pursuant to the ATM Sales Agreement, resulting in gross proceeds of $10,922 before deducting expenses of $329. There were no sales under the ATM Sales Agreement during the three months ended March 31, 2022. Pursuant to an amendment to the prospectus supplement relating to the ATM Sales Agreement filed by the Company with the SEC on April 15, 2022, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $16,929,022 under the ATM Sales Agreement.

During the year ended December 31, 2021, the Company issued and sold an aggregate of 1,375,000 shares of its common stock to Lincoln Park Capital, LLC pursuant to a purchase agreement entered into between Lincoln Park Capital, LLC and the Company in September 2020, resulting in gross proceeds of $2,614. There were no sales under the purchase agreement during the three months ended March 31, 2022.

On April 2, 2019, the Company issued and sold in a private placement an aggregate of (i) 11,838,582 units, consisting of 11,838,582 shares of its common stock and associated warrants, or the common warrants, to purchase an aggregate of 11,838,582 shares of common stock, for a combined price of $2.01 per unit and (ii) 1,096,741 units, consisting of (a) pre-funded warrants to purchase 1,096,741